Table of Contents

Volume 5 - Perkins Loans

Introduction.................................................................................... i
LOAN TYPES .................................................................................................................................................. I
RECENT CHANGES ....................................................................................................................................... I
Master Promissory Note, Electronic promissory notes, Retention of promissory notes ........................... i
Assignment to Department, Student Eligibility, Minimum monthly repayment,
Economic hardship deferments, Exit counseling and repayment information disclosure,
Late charges, Credit bureau reporting, Write-offs, Litigation, Rehabilitation of defaulted loans,
Regulations removed

Chapter 1: Participation, Fiscal Procedures, & Records ............. 1
PROGRAM PARTICIPATION AGREEMENT ............................................................................................. 1
ALLOCATION OF FUNDS ........................................................................................................................... 2
TRANSFER OF FUNDS ................................................................................................................................ 2
CASH MANAGEMENT ................................................................................................................................ 3
RECORDKEEPING REQUIREMENTS ........................................................................................................ 3
Repayment history and promissory note ....................................................................................................................... 4

REIMBURSEMENT TO THE FUND ............................................................................................................ 5
ASSIGNMENT ............................................................................................................................................... 5

Chapter 2: Student Eligibility........................................................ 7
ELIGIBILITY CRITERIA ................................................................................................................................. 7
OTHER ELIGIBILITY FACTORS .................................................................................................................. 8
Willingness to repay, Previous Perkins Loan cancellation due to disability ................................................... 8
Previous Perkins Loan discharged in bankruptcy

SELECTION PROCEDURES ........................................................................................................................ 9

Chapter 3: Making & Disbursing Loans ..................................... 11
LOAN MAXIMUMS ................................................................................................................................... 11
DISCLOSURE TO STUDENTS.................................................................................................................. 12
PROMISSORY NOTE ................................................................................................................................ 13
Master Promissory Note, Approved promissory notes, Closed-end vs. open-end ................................... 14
Changes in loan amount, Minimum monthly payment option

GENERAL DISBURSEMENT REQUIREMENTS ..................................................................................... 18
Power of attorney, Frequency of disbursements ..................................................................................................... 18
Uneven costs/unequal disbursements, Returning funds disbursed prior to attendance
Credit bureau reporting

Chapter 4: Repayment................................................................. 23
GRACE PERIODS ....................................................................................................................................... 23
Initial grace periods, Post-deferment grace periods,.............................................................................................. 23
Initial grace period for less-than-half-time attendance,
Calculating the grace period

PREPAYMENT ............................................................................................................................................ 25
INTEREST ACCRUAL ................................................................................................................................ 25
ESTABLISHING A REPAYMENT PLAN................................................................................................... 26
Calculating the payment amount ................................................................................................................................... 26

MINIMUM MONTHLY REPAYMENT AMOUNTS ................................................................................ 27
Conditions for minimum monthly repayment, Multiple loans at same school ........................................ 27
Loans from multiple schools, Hardship payment reduction

PAYMENT PROCESSING..........................................................................................................................
INCENTIVE REPAYMENT PROGRAM ....................................................................................................
ESTABLISHING REPAYMENT DATES ....................................................................................................
EXTENDING THE REPAYMENT PERIOD FOR HARDSHIP AND LOW-INCOME INDIVIDUALS
DISCHARGE DUE TO DEATH OR TOTAL AND PERMANENT DISABILITY....................................

29
29
30
31
32

Death, Total and permanent disability .......................................................................................................................... 32

CLOSED SCHOOL DISCHARGE ............................................................................................................. 33
BANKRUPTCY DISCHARGE .................................................................................................................... 34
Responding to complaint for determination of dischargeability .................................................................... 34
Procedures for responding to proposed Chapter 13 repayment plan
Resuming/terminating billing and collection, Bankruptcies filed before October 8, 1998
Bankruptcy and student eligibility

Chapter 5: Forbearance & Deferment ....................................... 39
FORBEARANCE ......................................................................................................................................... 39
Hardship ....................................................................................................................................................................................... 40

DEFERMENT .............................................................................................................................................. 40
In-school, Graduate fellowship, Rehabilitation training ........................................................................................ 41
Seeking full-time employment, Economic hardship, Concurrent deferment

HARDSHIP DEFERMENT FOR LOANS MADE BEFORE JULY 1, 1993 ............................................ 45
DEFERMENT EXCLUSIVE TO PERKINS LOANS MADE BEFORE JULY 1, 1993, AND NDSLS
MADE BETWEEN OCTOBER 1, 1980 AND JULY 1, 1993 .................................................................. 45
Service comparable to Peace Corps/ACTION volunteer ...................................................................................... 46
Temporary total disability deferment, Internship/residency deferment
Parenting deferments

DEFERMENTS EXCLUSIVE TO LOANS MADE BEFORE OCTOBER 1, 1980 .................................. 48
DEFERMENT AND DEFAULT .................................................................................................................. 48
DEFERMENT VS. IN-SCHOOL ENROLLMENT STATUS ..................................................................... 49

Chapter 6: Cancellation .............................................................. 51
TEACHING AND OTHER SERVICE CANCELLATIONS ....................................................................... 51
CANCELLATION PROCEDURES ............................................................................................................ 51
Application, Cancellation rates, Concurrent deferment, Payment refund ................................................... 51

CANCELLATION RESTRICTIONS ........................................................................................................... 52
Prior service, Defaulted loans, National and Community Service Act of 1990........................................... 52

TEACHER CANCELLATION ..................................................................................................................... 53
Who is a teacher? ..................................................................................................................................................................... 53
What qualifies as teaching full time for a full academic year? ........................................................................... 55
What if the borrower teaches part time at multiple schools? ........................................................................... 55
What if the borrower teaches in a private school? .................................................................................................. 56
What if the borrower teaches in a preschool or prekindergarten program? ............................................. 56
Cancellation for teaching in low-income schools ................................................................................................... 56
Cancellation for teaching in special education ........................................................................................................ 57
Cancellation for teaching in a field of expertise ....................................................................................................... 58

NURSE OR MEDICAL TECHNICIAN CANCELLATION ....................................................................... 58
CHILD OR FAMILY SERVICES CANCELLATION .................................................................................. 58
EARLY INTERVENTION CANCELLATION ............................................................................................. 58
HEAD START CANCELLATION............................................................................................................... 59
LAW ENFORCEMENT OR CORRECTIONS OFFICER CANCELLATION........................................... 59
MILITARY SERVICE CANCELLATION .................................................................................................... 60
VOLUNTEER SERVICE CANCELLATION .............................................................................................. 60
U.S. ARMY LOAN REPAYMENT PROGRAM ......................................................................................... 61
REIMBURSING AMOUNTS CANCELED ............................................................................................... 61
DEFINITIONS ............................................................................................................................................. 61

Chapter 7: Due Diligence:Billing & Collection ......................... 65
GENERAL REQUIREMENTS .................................................................................................................... 65
EXIT INTERVIEWS ..................................................................................................................................... 65
DISCLOSURE OF REPAYMENT INFORMATION .................................................................................. 67
CONTACT DURING GRACE PERIODS .................................................................................................. 68
BILLING PROCEDURES ........................................................................................................................... 69
Late charges, Notices of overdue payments, Contacting the borrower by telephone.......................... 69
Contacting the endorser—loans before July 23, 1992, Loan acceleration

ADDRESS SEARCHES .............................................................................................................................. 71
COLLECTION PROCEDURES .................................................................................................................. 72
Credit bureau reporting, Efforts to collect, Ceasing collection ......................................................................... 73
Alternatives to litigation, Litigation

BILLING AND COLLECTION COSTS ..................................................................................................... 77
Assessing and documenting costs ................................................................................................................................. 79

USING BILLING AND COLLECTION FIRMS ........................................................................................ 79
Account protection ................................................................................................................................................................ 79

Chapter 8: Default ....................................................................... 81
DEFAULT STATUS AND STUDENT ELIGIBILITY ................................................................................. 81
Satisfactory repayment arrangements, Loans with judgments ........................................................................ 81
Previously defaulted loans discharged for school closure

LOAN REHABILITATION .......................................................................................................................... 82
ASSIGNMENT ............................................................................................................................................ 83
Required documentation, Terms of assignment ...................................................................................................... 83

DEFAULT REDUCTION ASSISTANCE PROJECT ................................................................................. 84
PERKINS COHORT DEFAULT RATES ..................................................................................................... 85
Defining and calculating the cohort default rate, Borrowers entering repayment ................................ 85
Borrowers in default, Loan not included in cohort default rate
Rules for calculating the number of days in default

PENALTIES FOR HIGH COHORT DEFAULT RATES ............................................................................ 87

Appendix A: 2001 Perkins and NDSL Promissory Notes .......... 89